Abstract

http://ssrn.com/abstract=292620
 
 

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Is Time-Series Based Predictability Evident in Real Time?


Michael J. Cooper


University of Utah - David Eccles School of Business

Huseyin Gulen


Purdue University - Krannert School of Management

March 2004


Abstract:     
We show that out-of-sample tests used in the time-series predictability literature may suffer from test-size problems related to the common practice of exogenous specification of critical parameters, such as the choice of predictive variables, traded assets, and in-sample estimation periods. We perform specification searches across these parameters and find that rejections of the null hypothesis of no predictability are very sensitive to minor variations in parameter specification. We perform simulations using random factors to determine if the observed predictability in the data is real. The simulations suggest that much of the literatures' out-of-sample evidence of time-series based predictability is consistent with data-snooping.

Number of Pages in PDF File: 36

JEL Classification: C53, G10, G11, G12, G14

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Date posted: November 30, 2001  

Suggested Citation

Cooper, Michael J. and Gulen, Huseyin, Is Time-Series Based Predictability Evident in Real Time? (March 2004). Available at SSRN: http://ssrn.com/abstract=292620 or http://dx.doi.org/10.2139/ssrn.292620

Contact Information

Michael J. Cooper (Contact Author)
University of Utah - David Eccles School of Business ( email )
1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States
Huseyin Gulen
Purdue University - Krannert School of Management ( email )
1310 Krannert Building
West Lafayette, IN 47907-1310
United States
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References:  65
Citations:  21

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